Tax Payable by a Company Director

Understand what taxes you are responsible for as a company director in Belgium...

As the director of a company in Belgium, there are a number of taxes which may be applicable to your situation.

Definition of a company director

A company director is a private person who:

  • is mandated to act as a director, general manager, liquidator or the like
  • holds a senior job or position within the company, that is concerned with day-to-day management of a commercial, technical or financial nature, without a contract of employment

Company director's taxable income

The following are considered as taxable income for company directors:

  • Interest-bearing advances: Interest on advances (that is, on any cash loan, whether or not represented by shares) may be treated as dividends under certain circumstances. If that interest qualifies for treatment as dividends, it is subject to withholding tax, at a rate of 25 percent, and cannot be deducted from the company's tax as a business expense. If it is treated as interest, it is subject to a 15 percent rate
  • Rents from letting a property to the company: A company director may rent to the company a building or land that he owns. In principle, the rent that he is paid for the property is deemed to be income from property and is taxed at only 60 percent (after a lump sum deduction, generally 40 percent). Tax may also be further reduced by deducting interest paid on loans for acquiring or maintaining real-estate that generates income. Income from real-estate is not subject to social security contributions. In order to prevent abuse, such letting income is treated as professional income where it exceeds certain ceilings. The rent that the company pays is deductible from its taxable income
  • Income from the professional activities undertaken by company directors: Such income consists of various items, the most important of which is professional remuneration. Statutory wage-bill tax (bedrijfsvoorheffing/précompte professionnel) is withheld on remuneration paid to company directors - this does not cancel out the obligation to make tax payments on account

Deductible expenses for company directors

Company directors may deduct from their professional income the amount they pay in social security contributions and the premiums for minor-risks insurance that they pay to a mutual health insurance fund. Other business expenses are similarly deductible.

Deductible expenses are determined in a number of ways:

  • On a lump-sum basis: an amount representing 5 percent of gross income (after deduction of social security or similar contributions) received as a company director, subject to a maximum deductible ceiling of €3,200 (tax year 2007)
  • On the basis of certificates and receipts: Actual expenses include interest paid on capital borrowed in order to purchase shares in the company – except by subscription – from which remuneration is periodically received and, under certain conditions, sums devoted to settling the company's losses
  • Private persons may also benefit from a tax credit, calculated on any increase in investment in the business they make. The tax credit is 10 percent, subject to a ceiling of €3,750
  • An additional deduction of 3.5 percent to 13.5 percent on certain new investments is also possible
  • Notional interest may be deducted in proportion to the company's net worth

Losses

Business losses sustained by a one-person business in previous tax periods may be recovered, without limitations in time or as to amount. Losses sustained by either spouse may be deducted from the other spouse's income. Any residual loss after this offset may be carried forward to future tax periods.

Prepared using information supplied by ING Bank SA/NV www.ing.be